President Abdel-Fattah Al-Sisi issued a decree on 1 December raising tariffs on 320 imported goods by varying degrees, some by as much as 60 per cent, the maximum allowed under the international trade agreements to which Egypt is signatory. The move will lead to increases in the prices of these commodities, which the Ministry of Finance has said are luxury items and have locally-made equivalents. Aliya Al-Mahdi, former dean of the Faculty of Economics and Political Science at Cairo University, said the government's decision had come very late and was “badly timed”. It was unreasonable for the government to raise tariffs on some imported goods after their prices had already risen by 100 per cent after the floating of the pound which had doubled the value of the dollar, Al-Mahdi said. The Central Bank of Egypt (CBE) decided on 3 November to float the pound and to abandon its attempts to set the exchange rate. Since then, the value of the dollar has risen to reach LE18, whereas the CBE had previously tethered its value to LE8.88. Tariffs on some goods doubled from 30 per cent to 60 per cent as a result of this week's decree, including oranges, tangerines, apricots, soft bread, breadcrumbs and pineapples. For other goods, tariffs tripled from 20 per cent to 60 per cent, including on plums, pears, frozen strawberries and cherries.
Customs fees between five and 40 per cent on juices and ice cream rose to 20 to 60 per cent; customs on chewing gum rose from 40 per cent to 60 per cent; baked goods, carpets and floor coverings went up from 30 per cent to 60 per cent; matchsticks, fireworks, leather goods, perfumes, make-up and accessories increased from 40 per cent to 60 per cent; artificial flowers went up ten per cent to 60 per cent, and professional clothing rose from ten per cent to 20 per cent. Minister of Finance Amr Al-Garhi said in press statements after the decree was issued that the government had not raised tariffs on imported yameesh (nuts and dried fruits) because people needed these during Ramadan. Al-Mahdi was sceptical about the government's ability to monitor the markets after taking the decisions. “There are no guarantees that the prices of local products will not rise,” she warned. Meanwhile, a report by the Egyptian Centre for Economic Studies, a think tank, said the increases would boost demand for Egyptian agricultural and industrial products. It called on the government to make the investment atmosphere more appealing to local and foreign investors in order to be able to expand the production of local alternatives at lower costs and higher quality. It pinpointed the fact that the decisions would not affect industry, as the increases neither included raw materials nor intermediate goods. According to a statement by the Ministry of Finance on Sunday, the aim of the decisions is to regulate imports since the increases affect goods that have local equivalents such as furniture, dining accessories made of metal or porcelain, ceramics, carpets, leather goods, soap, cleaners, make-up, pens, décor and electrical appliances. The statement added there were also consumer goods that the decisions would regulate more closely to conserve hard currency, with the latter being directed to importing the basic goods needed by society and industry. The ministry expects the hikes will raise tariff revenues by LE6 billion if the volume of imports continues at the present rate. Al-Mahdi said it would have been beneficial if the Ministry of Finance had clarified the percentage these imports represented in terms of overall imports, in order to measure the significance of the tariff increases. “This decision would have been understandable before the floating of the pound to ration imports when foreign reserves were low,” she said. “But to take this step one month after the exchange rate shot up is unjustified, except that the government now wants to provoke the people and increase the suffering of the poor and middle classes.” On Monday, the CBE revealed that Egypt's foreign reserves had risen by $4 billion in November to reach $23 billion. The introduction of the new tariffs coincides with the application of the new value-added tax (VAT), which replaces the sales tax and will come in at 13 per cent instead of ten per cent on some goods. The government is also working on lifting subsidies on petroleum products, a decision taken late on 3 November. It is forging ahead in its plans to lift electricity subsidies, a decision that was taken two years ago and is being applied gradually until all the subsidies are gone by 2020. Egypt is obliged to follow World Trade Organisation regulations, but these allow countries experiencing an imbalance in their trade to impose up to 60 per cent tariffs. According to CBE figures, Egypt imported $56.310 billion worth of goods in 2015-2016, while exports amounted to $18.704 billion during the same period, or less than one third of imports. The writer is a freelance journalist.
Record increase in reserves: Net international reserves at the Central Bank of Egypt (CBE) increased by $4.02 billion to $23.06 billion, their highest level in more than five years, in November, a month that witnessed the floatation of the pound and the lifting of import controls. The increase in the reserves to the equivalent of a little less than five months of imports came as Egypt started receiving money from the International Monetary Fund (IMF) and global lenders following its adoption of a set of reforms including floating its currency and slashing fuel subsidies. These measures helped Egypt clinch a $12 billion, three-year loan from the IMF last month, with the first tranche of the loan, worth $2.75 billion, being paid last month. The CBE was also able to secure $2 billion in funding from international banks in November. Analysts welcomed the increase in the reserves as an indicator that the CBE has not needed to withdraw dollars from the reserves since the floatation as promised, with the commercial banks being able to cover their clients' needs without the CBE's intervention. Egypt burned through almost half of its foreign reserves following the 25 January Revolution to defend the local currency after the political turmoil undermined the flow of tourists and investment to the country. CBE Governor Tarek Amer has said he is targeting $25 billion in reserves by year's end.
